'Cash-for-clunkers' gets a refill in US

The US government has added another $US2 billion to its popular "cash-for-clunkers" program that helps motorists trade in their old gas guzzlers.

07 August 2009

The US government has added another $US2 billion to its popular "cash-for-clunkers" program that helps motorists trade in their old gas guzzlers.

The US Senate voted to refill the popular car incentive program on Thursday, tripling the $US1 billion fund that has led to big crowds at once deserted car showrooms.

US President Barack Obama will sign the bill that extends the program until the first Monday in September, to prevent the two-week-old incentives from running out.

"Now more American consumers will have the chance to purchase newer, more fuel-efficient cars and the American economy will continue to get a much-needed boost," Obama said in a statement hailing the vote.

Under the program, passenger car owners get a voucher worth $US3,500 ($A4,170) if they trade in a driveable vehicle that got a combined city/highway mileage of 18 miles per gallon (13 litres per 100km) or less when it was new, for a new car getting at least 22 mpg (11 litres per 100 km).

Vouchers of $US4,500 ($A5,361) are available for owners who trade in a passenger car that got 18 mpg (13 litres per 100 km) or less combined, for a model that gets at least 28 mpg (8 litres per 100 km).

Owners of old SUVs, pickups and vans can take advantage of similar benefits. Dealers ensure the traded-in vehicles are crushed and shredded.

The extra money, approved by the House last week, is aimed at helping automakers and spurring the economy while removing the least fuel-efficient vehicles from the road.

Last week, the government said the program was running out of money and the fund would be exhausted by Friday if it was not replenished.

Up until late Tuesday, the most recent data available, more than $US775 million of the original $US1 billion had been spent, accounting for the sale of nearly 185,000 new vehicles.

Administration officials estimate the new money will last into Labour Day and could prompt another 500,000 vehicle sales.

Dealers said the additional money would help them maintain a sales pace they haven't seen in months and continue to benefit from heavy publicity surrounding the rebates.

Car dealers saw sales rise in July, when Ford Motor Co achieved its first year-over-year sales increase since November 2007.

"People are still coming in. It's like everyone out there has been given the green flag," said John Rogin, who runs a Buick dealership in Livonia, Michigan.

Senate opponents of the program, most of them Republicans, question its effectiveness and cost.

They contend the funding is leading the government to pick winners and losers and that many car buyers, stoked by speculation about the program last spring, simply held off buying until the incentives started in July.

"These buyers would have bought the cars anyway," said Senator Richard Shelby, who opposed the plan.

Auto industry analyst Aaron Bragman of IHS Global Insight said it was unlikely that demand will remain as high as it is now.

Many people who qualified have already bought cars and while the rebates are expected to boost total vehicle sales in 2009, Bragman predicted lower sales next year because many customers have already taken advantage of the incentives.

"You are not going to see a continuation of the frenzied sales pace," Bragman said.

"I don't think they will use up that money any time soon."

Automakers are planning for a boost in sales.

Hyundai Motor Co has added a day of production at its Montgomery, Alabama, factory, while General Motors Co and Ford are considering following suit.